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Civilsdaily

Type: Op-ed

  • On the GST issue, the Centre must lead

    The article deal with the issue of GST compensation and analyses the various estimates of revenue shortfall given by the Centre.

    Context

    • The Goods and Services Tax (GST) Council meeting has now been deferred to the first week of October due to sharp disagreement between the States and the Centre.

    Background of GST

    • The Centre had brought the States on board GST by promising higher revenue collection.
    • States were lured by the promise of 14% annual growth in GST revenue over the base year of 2015-16.
    • Any shortfall from this (for five years) was to be compensated by levying a cess on luxury and sin goods.

    What are the options given by the Centre

    •  The transfers due since April 2020 have been withheld.
    • In the last GST Council meeting held on August 27, the Centre gave the States two options.
    • First, they could borrow ₹97,000 crore (the shortfall in the GST revenue compensation) from the Reserve Bank of India (RBI) under a special window at a low rate of interest.
    • Second, borrow ₹2.35-lakh crore (the total compensation shortfall) from the market with the RBI facilitating it.
    • The burden of repayment would be borne by the future collections from the compensation cess.
    • It was proposed that this cess which was to end in June 2022 could be extended to facilitate the repayment of the debt.

    Issues with the estimates

    • Given the uncertainty, how accuracy of the estimates of ₹97,000 crore and ₹2.35-lakh crore offered to the States is questionable.
    • When the Ministry of Finance is refusing to give a figure for growth in 2020-21, how such estimates are arrived at gains significance.

    Budgetary calculations

    • The Union Budget presented on February 1, 2020 assumed a nominal growth of 10%.
    • But optimistically, the Centre’s budgetary calculations will be off by at least 20%.
    • Revenue will fall by much more than 20%.
    •  So, income tax collection will also be short by much more than 20%.
    • The direct tax/GDP per cent may be expected to fall from 5.5% last year to less than 4% this fiscal.
    • Thus, at an optimistic guess, if the economy declines by only 10%, the total tax collection will be down by about ₹12-lakh crore in 2020-21.

    Conclusion

    As many predictions are that the economy will be down by much more than 10% used in the calculations above, the revenue shortfall is likely to be far greater. This points to the dire position of the Centre (and the States) and the inevitability of a large borrowing programme. Only the Centre is in a position to do such massive borrowing.

    Back2Basics: Two options for the GST compensation

    • Option 1 has a special window for states, coordinated by the Finance Ministry, to borrow the projected shortfall of Rs 97,000 crore only on account of GST implementation — and not the Covid-19 pandemic.
    • This amount can be fully repaid from the compensation cess fund, without being counted as states’ debt.
    • Option 2 takes into account the impact of the pandemic, proposing states to borrow the entire Rs 2.35 lakh crore and bearing the interest burden though principal will be repaid from the cess proceeds.
    • The GST shortfall amount (Rs 97,000 crore) will not be counted as states’ debt, while the rest of the amount of Rs 1.38 lakh crore will be counted in the books of the states.

    Source:

    https://indianexpress.com/article/business/economy/gst-compensation-centre-gives-states-2-options-easier-terms-for-lower-borrowing-6575499/

  • Role for India in Afghan peace push

    The U.S. objectives

    • Following  4 were the states as objectives of the Afghan peace process.
    • 1) An end to violence by declaring a ceasefire.
    • 2) An intra-Afghan dialogue for a lasting peace.
    • 3) The Taliban cutting ties with terrorist organisations such as al Qaeda.
    • 4)  U.S. troop withdrawal.

    Evolving Indian stand in the peace process

    • India’s vision of a sovereign, united, stable, plural and democratic Afghanistan is one that is shared by a large constituency in Afghanistan, cutting across ethnic and provincial lines.
    • At Doha meeting, India’s External Affairs Ministerreiterated that the peace process must be “Afghan led, Afghan owned and Afghan controlled”.
    • But Indian policy has evolved from its earlier hands-off approach to the Taliban.
    • U.S. and Russian representatives suggested if India had concerns regarding anti-India activities of terrorist groups, it must engage directly with the Taliban. In other words.

    Limited interest of the major powers

    • Major powers have limited interests in the peace process.
    • The European Union has made it clear that its financial contribution will depend on the security environment and the human rights record.
    • China can always lean on Pakistan to preserve its security and connectivity interests.
    • For Russia, blocking the drug supply and keeping its southern periphery secure from extremist influences is key.
    • That is why no major power is taking ownership for the reconciliation talks, but merely content with being facilitators.

    Conclusion

    A more active engagement will enable India to work with like-minded forces in the region to ensure that the vacuum created by the U.S. withdrawal does not lead to an unravelling of the gains registered during the last two decades.

  • Power, problems and potential of federalism

    The article analyses the issues of distribution of powers under the Constitution and the issues linked with it.

    Debate on the role of Centre and states

    • There is an argument for the need to re-examine the distribution of powers under the Seventh Schedule so as to rationalise the Centrally Sponsored Schemes (CSSs).
    • Under the Centrally Sponsored SchemesCentre extends support in sectors pertaining to the State List.
    • Spending by the Centre on a state subject like health and need for states’ contribute to a Union subject like defence is considered.
    • However, the constitutional assignments between the Centre and subnational governments in federations, are done broadly on the basis of their respective comparative advantage.
    • That is why the provision of national public goods is in the federal domain and those with the state-level public service span are assigned to the states.

    3 settled issues in the debate

    • The debate seems to have settled on at least three counts.
    • One, the federal organisation of powers can be revisited and reframed.
    • Two, the CSSs must continue but they should be restructured.
    • Three, there is a need for an appropriate forum to discuss the complex and contentious issue of reviewing federal organisation of powers and restructuring of central transfers.

    Review of the subjects in lists

    • In spite of health being a state subject, the response to collective threats linked to the subject required some kind of organisation of federal responsibilities on a functional basis.
    • A typical response is to recommend shifting subjects to the Concurrent List to enable an active role for the Centre.
    • The High-Level Group, constituted by the 15th Finance Commission, recommended shifting health from the State to the Concurrent List.
    • A similar recommendation was made earlier by the Ashok Chawla Committee for water.

    Challenges

    • Shifting of subjects from the State to Concurrent List in times of acute sub-nationalism, deep territorialisation and competitive federalism is going to be challenging.

    Way forward

    • The most collective threats and the challenges of coping with emerging risks of sustainability are linked to either the State List subjects or require actions by states — water, agriculture, biodiversity, pollution, climate change.
    • This extended role of ensuring security against threats to sustainability of resources forms a new layer of considerations.
    • This should define the contours of a coordinated response between the Centre and States — as it happened during the pandemic.
    • In fact, such threats and challenges require the states to play a dominant role.
    • At the same time, the Centre must expand its role beyond the mitigation of inter-state externalities and address the challenges of security and sustainability.

    Consider the question “The federal organisation of powers under the Constitution’s Seventh Schedule needs review. In light of this, examine the problems faced by the distribution and suggest the challenge the review would face.”

    Conclusion

    The ongoing friction between the Centre and the states over GST reforms tells us that consensus-building is not a one-time exercise. It has to allow sustained dialogue and deliberation. Perhaps it is time to revisit the proposal for an elevated and empowered Inter-State Council.

  • India must reject the inequitable climate proposal

    The article takes stock of India’s climate action and the issue of phasing out the use of coal.

    Context

    • The UN Secretary-General called on India to give up coal immediately and reduce emissions by 45% by 2030.

    State of India’s climate action

    • India’s renewable energy programme is ambitious and its energy efficiency programme is delivering, especially in the domestic consumption sector.
    • India is one of the few countries with at least 2° Celsius warming compliant climate action.
    • India is also among one of smaller list of countries on track to fulfilling their Paris Agreement commitments.
    • India’s annual emissions, at 0.5 tonnes per capita, are well below the global average of 1.3 tonnes.
    • In terms of cumulative emissions, India’s contribution by 2017 was only 4% for a population of 1.3 billion.

    How West is performing?

    • While talking about their phasing out of coal, the global North has obscured the reality of its continued dependence on oil and natural gas, both equally fossil fuels, with no timeline for their phaseout.
    • While it is amply clear that their commitments into the future set the world on a path for almost 3°C warming, they have diverted attention by fuzzy talk of “carbon neutrality” by 2050.
    • Environmentalists in developed countries, unable to summon up the domestic political support have turned to pressure the developing countries.
    • All of these are accompanied by increasing appeals to multilateral or First World financial and development institutions to force this agenda on to developing countries.

    Implications of ending coal investment for India

    •  Currently, roughly 2 GW of coal-based generation is being decommissioned per year.
    •  But meeting the 2030 electricity consumption target of 1,580 to 1,660 units per person per year, will require anywhere between 650 GW to 750 GW of renewable energy.
    • Unlike the developed nations, India cannot substitute coal substantially by oil and gas and despite some wind potential, a huge part of this growth needs to come from solar.
    • However, renewables at best can meet residential consumption and some part of the demand from the service sector.
    • Currently, manufacturing growth powered by fossil fuel-based energy is itself a necessity.

    Conclusion

    India must unanimously reject the UN Secretary General’s call and reiterate its long-standing commitment to an equitable response to the challenge of global warming.

  • Our larger China picture

    Context

    • After the skirmish at the border, Beijing started to concentrate troops, armoured vehicles and munitions opposite our posts in Aksai China at Galwan.

    2 interpretations of China’s move

    • First believes that the Chinese exercise was a territorial snatch in Aksai Chin, which they believe is entirely theirs.
    • The move was accompanied by a “lesson” to the Indians on aggressive Indian behaviour in not conceding Aksai Chin.
    • The second school of thought in India believes that territory has nothing to do with it.
    • They believe that, due to growing economic power, Beijing will lay down the rules of world governance.

    How it matters for India

    • India contest China’s entire southern border, refuse to join the Belt and Road initiative, create an anti-China maritime coalition, compete with them for influence in South East Asia and Africa.
    • India is also unsupportive of their crackdown on Taiwan, Hong Kong and Xinjiang and move ever closer to the United States.
    • When China assumes hegemonic power after 2030, India is going to get a nasty surprise.
    • Secularism, democracy and the rights of man will play no part in Chinese foreign policy.
    • China will overturn every international, financial, trade, diplomatic, arms control and nuclear agreement that the world has put together in seven decades.

    Way forward

    • We in India need to conduct a large and vociferous debate on Chinese intentions.
    • If the Chinese intention is to “teach us a lesson” we need a new national strategy, combining diplomatic and military means.
    •  If our national goal is to concentrate on the creation of wealth and growing GDP, let us proclaim it, tighten our belt, look down and avoid conflict.

    Conclusion

    What China wants is Indian acceptance of Beijing’s benign superiority, and that is a purely Chinese trait, not to be confused with the known rules of international diplomacy. Talking from a position of inferiority will not lead to an equitable solution. But first, a national debate.

  • Nationalism and the crisis of federalism

    The article analyses the challenges federalism in India faces and the important role played by the division of states based on the languages.

    Three conceptions of nationalism in India

    • Following three conceptions of nationalism were prevalent in India before independence.
    • The first, the idea that a community with a strongly unified culture must have a single state of its own.
    • The second saw the nation as defined by a common culture whose adherents must have a state of their own.
    • But this common culture was not ethno-religious.
    •  It conceives common culture in terms of a strong idea of unity that marginalises or excludes other particular identities.
    • A third nationalism accepts that communities nourished by distinct, territorially concentrated regional cultures have the capacity to design states of their own as also educational, legal, economic, and other institutions.
    • This may be called a coalescent nationalism consistent with a fairly strong linguistic federalism.
    • The central state associated with it is not multi-national.
    • At best, it is a multi-national state without labels, one that does not call itself so; a self-effacing multi-national state.

    Suspicion of linguistic identities

    • After Partition, the Indian ruling class began to view with suspicion the political expression of even linguistic identities.
    •  It was feared that federation structured along ethno-linguistic lines might tempt politicians to mobilise permanently on the basis of language.
    • The second fear was about an increase in the likelihood of inter-ethnic violence, encourage separatism and eventually lead to India’s break up.
    • Thus, when the Constitution came into force in 1950, India adopted unitary, civic nationalism as its official ideology.

    Formation of states on linguistic basis and its implications

    • A unitary mindset shaped by the experience of a centralised colonial state was resurrected.
    • The second tier of government was justified in functional terms, not on ethical grounds of the recognition of group cultures.
    • Following the Committee’s recommendations, States were reorganised in 1956.
    • India slowly became a coalescent nation-state, moving from the ‘holding together’ variety to what is called the ‘coming together’ form of (linguistic) federalism.
    • This meant that regional parties were stronger than earlier in their own regions and at the centre.
    • This let to more durable centre because it was grounded more on the consent and participation of regional groups that, at another level, were also self-governing.
    • Indian federalism also attempted to remove its rigidities by incorporating asymmetries in the relation between the Centre and different States.
    • Treating all States as equals required the acknowledgement of their specific needs and according them differential treatment.

    Conclusion

    Coalescent nationalism has served India well, benefiting several groups in India. True, it has not worked as well in India’s border areas such as the North-east and Kashmir. But their problems can only be resolved by deepening not abandoning coalescent nationalism.

  • Understanding the significance of Kesavananda Bharati case

    The article revisits the impact and significance of the case for the democracy in India.

    Understanding the Basic Structure doctrine

    • Basic Structure and essential features doctrine was expounded in the Kesavananda Bharati case.
    • In the case, the validity of the 29th amendment which immunised, in the Ninth Schedule Kerala’s takeover of the religious mutt’s property was challenged.
    • Basic structure is the power of judicial review and essential features are what the Court identifies as such in the exercise of that power.
    • Justice Bhagwati remarkably enunciated as an essential feature the “harmony” between fundamental rights and directive principles.
    • The crucial message though is that the apex court has, in the rarest of rare cases, the constituent power to pronounce a constitutional amendment invalid.

    Limits on the powers of Supreme Court

    • The Court is bound by the “golden triangle” of rights created by Articles 14, 19, and 21 of the Constitution.
    • Court must derive the “spirit” of the Constitution by reference to the provisions of the Constitution.
    • Since 1973, the evidence shows the Apex Court has shown utmost democratic responsibility and rectitude in interpreting the doctrine of BSEF.

    Consider the question asked by the UPSC in 2019 “Parliament’s power to amend the Constitution is limited power and it cannot be enlarged into absolute power”. In light of this statement explain whether parliament under article 368 of the constitution can destroy the Basic Structure of the Constitution by expanding its amending power? “

    Conclusion

    The ultimate message of BSEF doctrine is not merely to set limits to the power of the managers of people, but to make little by little the tasks of emancipation less onerous.

  • Urban unemployment in India

    The article discusses the issue of vulnerability of informal jobs in India and suggests the steps to address the problem.

    The urban unemployment in India crept up to 9.83% in August as against 9.15% in July, according to monthly unemployment data released Tuesday by the Center for Monitoring Indian Economy (CMIE). In other words, roughly one in every 10 person in urban areas cannot find work

  • Crisis in education in rural India and NEP

    The article analyses the missing focus on the rural youth in the National Education Policy 2020 and its implications.

    Education in rural India and NEP

    • Poor quality education marks and mars the lives of rural citizens.
    • The NEP fails to address the growing school differentiation in which government schools are now primarily attended by children of disadvantaged castes and Adivasi groups.
    • The mushrooming of private schools caters to the aspirations of the more advantaged castes and classes.
    • The NEP overlooks the complexity of contemporary rural India, which is marked by a sharp deceleration of its economy, extant forms of distress, and widespread poverty.
    • Rural candidates are finding it increasingly difficult to gain entry into professional education.
    • The lack of fit between their degrees and the job market means that several lakhs of them find themselves both “unemployable” and unemployed.

    What the NEP misses

    • NEP overlooks the general adverse integration of the rural into the larger macroeconomy and into poor quality mass higher education.
    • The report calls for the “establishment of large, multi-discipline universities and colleges” and places emphasis on online and distance learning (ODL).
    • However, correspondence courses and distance education degrees have become a source of revenue generation for universities.
    • The possibility of forging and promoting environmental studies for local ecological restoration and conservation are missing.
    • Emphasis on local health and healing traditions from the vast repertoire of medical knowledge is missing.
    • Vernacular architectural traditions and craftsmanship to use local resources find no mention at all in the NEP.

    Neoliberal ideas in NEP

    • The NEP moots the possibility of establishing “Special Education Zones” in disadvantaged areas and in “aspirational districts”.
    • But the report provides no details as to how such SEZs will function and who will be the beneficiaries of such institutions.

    Conclusion

    The NEP fails to cater to the needs of rural India’s marginalised majority, who in so many ways are rendered into being subjects rather than citizens.

  • India needs to change the framework of non-involvement

    Realignment of relations is taking place in the Middle East with wider implications for the future of the region. India needs to reconsider its framework based on the non-involvement.

    Recent geopolitical developments

    • India-China tensions have soared over the border issue.
    • The Afghan peace process is underway with the first direct talks between Kabul and the Taliban insurgents at Doha, in Qatar.
    • The normalisation of the relations between Israel and Arab countries began with the UAE and Bahrain normalising the relations.

    Issues with the development

    • The chances of failure in Afghanistan are real.
    • The momentum behind the normalisation of ties between Israel and the Gulf kingdoms, may not necessarily lead to broader peace in the Middle East.
    • The US initiatives in Afghanistan and Arabia are driven by President Donald Trump’s quest for diplomatic victories.

    Why it matters to India

    1) The vulnerability of the peace process

    • Because of competing interests, the peace process in Afghanistan and the Middle East remain vulnerable.
    • The unfolding dynamic will alter the geopolitical landscape in both places.
    • Whether peace breaks out in Afghanistan or not, the Taliban is here to stay.
    • As UAE and Bahrain join Egypt and Jordan in having formal relationships with Israel, the contradiction between Arabs and Israelis is no longer the dominant one in the region.

    2) India should recognise the importance of Arabia

    •  India’s strategic community tends to take too narrow a view of the Arabian salience.
    • The focus is mostly on ensuring oil supplies, promoting manpower exports, and managing the Pakistan problem.
    • We should consider that the Afghan peace talks are taking place in Qatar, a tiny Gulf Kingdom.
    • The UAE and Saudi Arabia were the only countries to recognise the Taliban government in the late 1990s.
    • This time around, they appear to have taken a backseat.
    • Delhi will need to pay more attention to the unfolding realignments between the Arabs and non-Arab states like Iran, Turkey and Israel.

    3) Paradox of American power

    • The U.S. is being seen as a declining power in the matters of the Middle East and Afghanistan.
    •  But the reality remains that the US is the one forcing a change in both the places.

    4) Implications of strategic vacuum created by the U.S. exit

    • As the US steps back from the region, the resulting strategic vacuum is likely to be filled by Russia and China.
    • Russia and China are quite active in both the Middle East and Afghanistan.
    •  China’s future role in Afghanistan, in partnership with Pakistan, could be quite significant and will be of some concern for India.
    • Regional powers have already acquired much say in the new geopolitics of the Middle East.
    • Qatar and UAE punch way above their weight, Iran, Saudi Arabia, and Turkey are locked in a major contest for regional influence.

    5) Domestic politics in the country

    • Religious radicalism, sectarian and ethnic divisions, and the clamour for more representative governments are sharpening conflicts within and between countries.
    • The collapse of the oil market is undermining the region’s economic fortunes.
    • Collapsing oil market is also making it harder for political elites to address the emerging political challenges.

    Consider the question “Middle East is going through the major realignment of relations. What are its implications for India?.

    Conclusion

    As the old order begins to crumble in the greater Middle East, the question is no longer whether India should join the geopolitical jousting there; but when, how and in partnership with whom.